Quality Money Management : Process Engineering and Best Practices for Systematic Trading and Investment

54 CHAPTER ◆ 4 Managing Design and Development

system. If this is not the case, the operational risk increases due to having inexperienced

people fixing problems. Very often, product teams move on to other design and develop-

ment projects after implementing a new system. To the extent that teams may work on mul-

tiple systems, the goal is a continuous flow, or pipeline, of systems, each time increasing the

velocity by improving the inputs and outputs of each step of the process. The product team

should include individuals with the following skill sets and responsibilities:

TABLE 4-1

Traders or portfolio
managers Computer programmers Financial engineers Marketing professional

Trading Prototype development Quantitative research Gather information on
competing systems

Strategy development Time lines Backtesting Raising investment capital

Performance testing Performance testing Performance testing Performance testing

Implementation of
algorithms

Object and data maps Prototype development Risk and portfolio

attribution analysis

Risk and portfolio
attribution analysis

Software design,

programming, and code

review

GUI and regression testing Develop and present

marketing materials

We recommend, depending on the nature and size of the project, one senior program-

mer and two junior programmers. (The goal is redundancy due to the risk of a single

point of failure.) The lead programmer manages a software development team for Stage 3.

A marketing professional should be involved in performance testing and monitoring of

the trading/investment systems for suitability with the interests of the targeted investor

group. Marketing a trading/investment system must interact with engineering and can-

not exist separately from it, right from the outset. The product team writes the Money

Document, which will clarify for all team members the business goal of the project.

Clarity of purpose should eliminate problems associated with an information technology

vision, a financial engineering vision, and a trader ’ s vision that are not all the same. This

should result in fewer broken promises later on.

Very important is the value stream manager, that is, team leader (who is usually also

a functional team member), who directs the value-stream mapping process, approves the

schedule, timeboxes (planning the schedule is best done by someone with experience

using Gantt charts and critical path methods, which may very well be the lead program-

mer) and budget, moderates discussions, and in time of deadlock casts the deciding vote.

The team leader also interacts with top management and investors, and leads presenta-

tions at gate meetings. Additionally, the team leader sets bonuses for team members,

which gives the team leader equal power over a member ’ s functional manager. Both

management and the team members review the team leader once the project is complete.

Normally, a financial engineer or senior IT professional makes better team leaders.

Additionally, as said, a team may have a facilitator, someone who is well versed in qual-

ity and teamwork, and helps the team interact more effectively, say, by having more produc-

tive meetings. A facilitator helps the team work smarter, but does not directly participate

in the team ’ s work or act as a rubber stamp for management. In this capacity, a facilitator

keeps meetings on track, focusing discussion on gate deliverables, not hidden agendas.

In total, we recommend a product team size of between three and ten people. Smaller

teams work faster and tend to produce results more quickly, while teams of greater size

usually require additional advising and even subteams to operate effectively. Larger teams